China Unicom (Hong Kong) Limited (HKG:762) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that China Unicom (Hong Kong) Limited (HKG:762) is about to go ex-dividend in just four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase China Unicom (Hong Kong)'s shares on or after the 5th of June will not receive the dividend, which will be paid on the 26th of June.

The company's next dividend payment will be CN¥0.1336 per share. Last year, in total, the company distributed CN¥0.34 to shareholders. Based on the last year's worth of payments, China Unicom (Hong Kong) stock has a trailing yield of around 5.7% on the current share price of HK$6.42. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for China Unicom (Hong Kong)

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. China Unicom (Hong Kong) paid out 55% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 41% of its free cash flow in the past year.

It's positive to see that China Unicom (Hong Kong)'s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, China Unicom (Hong Kong)'s earnings per share have been growing at 13% a year for the past five years. China Unicom (Hong Kong) has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, China Unicom (Hong Kong) has lifted its dividend by approximately 7.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is China Unicom (Hong Kong) an attractive dividend stock, or better left on the shelf? China Unicom (Hong Kong)'s growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about China Unicom (Hong Kong), and we would prioritise taking a closer look at it.

In light of that, while China Unicom (Hong Kong) has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for China Unicom (Hong Kong) that we recommend you consider before investing in the business.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.